These two words are generally used interchangeably but the fact of the matter is there is some differences between them. Through this article we try to understand this comprehensivelly specially in Indian context.

The predominant role of this sector can hardly be ignored as the NSS survey report on “Informal Sector and Conditions of Employment in India, 2004-05” shows that out of the total workers, nearly 82 per cent in the rural areas and 72 per cent in the urban areas were engaged in the informal sector. The Government realizing criticality of the development of this sector established the National Commission for Enterprises in the Unorganized Sector (NCEUS) in 2004 as an advisory body. The aim of the Committee is to bring about improvement in the productivity and generation of large scale employment opportunities on a sustainable basis, particularly in the rural areas. NCEUS has estimated that in 2005 there were 423 million informal workers in India of which 395 million belonged to the informal sector. The remaining 28 million were informal workers in the Informal sector.

In the survey conducted by NSSO, NSSO defines the informal sector enterprises comprise of all unincorporated proprietary and partnership enterprises. However, National Accounts Statistics (NAS) defines the unorganised sector in addition to the unincorporated proprieties or partnership enterprises, includes enterprises run by cooperative societies, trust, private and limited companies.


The informal sector can therefore, be considered as a sub-set of the unorganised sector.

However, in a detailed report titled Report on Definitional and Statistical Issues Relating to the Informal Economy was submitted in 2008 in which the Commission has recommended that the Informal Sector be defined as “The unorganized sector consists of all unincorporated private enterprises owned by individuals or households engaged in the sale and production of goods and services operated on a proprietary or partnership basis and with less than ten total workers”.

The unorganised sector refers to those enterprises whose activities or collection of data is not regulated under any legal provision or do not maintain any regular accounts. For instance, the units that are not registered under the Factories Act, 1948 form the unorganised composition of the manufacturing sector. Organised sector is the sector which comprises enterprises regarding which statistics are available from the budget documents or reports etc.


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